- Demands to always have the optimal short term investment performance lead to medium and long term below average performance.
- Attempts to find the best current fund manager based on the analysis of past data fail regularly, because a particularily good result only is achieved when the technique is optimally suited to the market environment, and this does not usually happen in the following period.
- An incorrect strategy leads either to a too early or too late exit in the captial markets.
- The solution for us and our clients lies in the systematic hedge strategy:
- we do not try for the perfect trade in market rallies. This gives the advantage that due to our confidence in our strategic hedge we do not exit the market too early.
- with the convincing result in downtrends, because there the effects of our hedges prevent an exit from the stock market, yet save capital from serious damage.
- the underperformance in non-trending markets is part of the system and an unavoidable price for the advantages of the proceedure.
Safe, but not too safe...
...is the goal and result of our work. The goal of our approach is to find a compromise between the need for security in times of falling prices and the necessity of giving up this security in times of climbing prices. Compared to the markets we reduce risk (volatility) over the long term, thereby giving up a top-result in market upmoves. Over a number of bear and bull cycles we outperform the markets.
Investment Management, or "Do it yourself"
Management of own or other assets does not seem difficult at first. Information and product alternatives are freely available and in an era of the internet visible to anyone.
Experienced market participants will have lived through at least one "baisse" (price fall over a longer period of time) and become more cautious, as this event leaves a deep impression. The result is that the now experienced investor becomes part of the problem, and does not realize the full potential for the upmove. He is constantly tempted to hedge the paper profit so that this cannot be lost in the next correction.
Anyone who has not been slowed down by experience would have been able in any time period to achieve short term profits, whether it is with tulip bulbs or railway stocks, gold or Japanese warrants, biotechnology or internet stocks. Extreme market phases are formed out of a combination of great liquidity through many new buyers in the market, and a belief that this time everything is different because... . We have experienced these cycles many times and have therefore come to a conclusion which will seem logical to any neutral observer: that by giving up on the chase after short term optimal results a long satisfactory return is possible. We therefore don´t chase short term spectacular profits, and thereby avoid the spectacular losses that tend to follow them.
A balanced risk/reward relationship
In addition to the individual investment structure of stocks and bonds, the weightings of which are determined by the risk/reward preferences of the individual investor, we use systematic hedge systems, unless the investor specificly requests that we do not. This means that in times of falling markets we reduce the investment grade step by step, and increase the investment grade in times of rising markets, also in a series of steps. During the past 20 years we have acquired an undeniable competence in the disciplined and reliable inplementation of these systems, giving a balanced relationship between unhedged products and the over-secure guarantee products.